School board, County Council eye Monday D-day

Subheadline:

Upcoming decision on tax rates could affect school budget.

Even if the Beaufort County Council were to decide Monday to raise taxes the 2 percent needed to support this year's schools budget, the taxes actually collected are likely to come up short. School Board and County Council members learned Monday at a joint initiative committee meeting that shortfalls in local taxes are hurting the schools more than expected.

In late June, Beaufort County Council approved by a 6-5 vote the school district's requested $175.3 million operating budget for 2010-11, but not the 2 percent tax increase needed to pay for it.

School board members have since said they would try to win one more vote before County Council sets the tax millage rate, traditionally at their last meeting in August, set for 6 p.m. Monday.

Without the 2 percent hike, school officials have said they will need to cut 2.4 million from this year's budget, while council members have urged them to spend down their fund balance instead.

However, Beaufort County Schools Chief Operations Officer Phyllis White said Monday that the amount of local tax collections approved in the June ordinance - about $116 million - assumed that taxes would be collected at 100 percent - which has happened only twice in the past eight years and not recently.

The financial picture is bleaker than previously thought, White said, and if County Council does not raise taxes, the schools could be closer to $4 million short for the school year that began for students on Monday.

Last year, the school district's revenue from local taxes was $2.4 million less than predicted; in 2008-09, $1.3 million fewer dollars were in school coffers than expected.

County Chief Financial Officer David Starkey said that the county usually collects more than 99 percent of property taxes... eventually, though not always in time for the fiscal year.

However, Starkey also noted a huge revenue drain hitting the county, and said it's hitting the school district much harder.

"You've got to remember that when we start a tax year, and people switch from 6 to 4 percent... that brings your total collected down, that affects your number greatly," Starkey said.

"When you lose 1,000 properties and 51 million off of your assessed (revenue for operations), that is going to have an effect on you all." "We agree," said School Board Chairman Fred Washington.

Due to an unintended consequence of the 2006 state Act 388, the school district is taking in fewer and fewer local taxes.

The act did away with taxes on owner-occupied homes for school operations, promising to replace the lost revenue with state sales tax.

When Act 388 went into effect, a mass of second-homeowners switched from secondary homes (taxed at 6 percent) by claiming South Carolina as their primary residence. Those who switch are taxed at 4 percent for the county, with zero going to operate schools.

The sales tax the state owes Beaufort County this year - about $41 million - is to equal the amount lost from Act 388 in 2006, and does not address the 6-to-4 percent switch, which Starkey said equaled about $52 million in lost school district revenue in the six months from December to June alone.

Act 388 compounded legislation already hurting local school funding: The state's 1977 Education Finance Act redistributes money from wealthy counties to poor ones. In recent years Beaufort County has paid heavily into the system while receiving nothing in return. That situation leaves county property owners almost totally responsible for local education funding.

Act 388 caps the amount schools can raise in taxes to the previous year's budget plus the consumer price index and population growth. Therefore, each year without a tax increase limits how much revenue the district gets forever after.

"You're putting us in a box, and in a box we'll never recover from," said George Wilson, who represents Sun City and Okatie on the School Board. "All we're asking for with the $116.5 (million) is just to stay even. We're losing about $2 million a year under Act 388. All we want to do is be even, and the county's up 5.6 percent."

School Board member Jim Bequette of Lady's Island displayed an article from the state's constitution requiring any governing body of a school district to levy enough taxes to pay any deficiencies from the previous year. (Article X, Section 7(B).

But Jerry Stewart, who represents Sun City and Okatie on County Council, said that doesn't mean a blank check.

"You work to what your actual revenues are, and you live within the means of what's being received," he said.

County Council has, on occasion, set the millage rate in September, though that delays the mailing of tax bills.

White and Starkey are asked to bring to the 2 p.m. Monday Finance Committee meeting an agreed-upon mill value, as well as projections about what that will mean for schools. The Council will then decide how to go forward.

"Monday we'll know whether we have to go into our fund balance or cut programs," said Laura Bush, Bluffton's School Board representative.

WHAT IS MILLAGE?

Millage is a tax rate on property, expressed in mills per dollar of assessed value of the property.